City of Ottawa Transit Smart Card Strategy. June 15, City of Ottawa Transit Services

Transcription

1 City of Ottawa Transit Smart Card Strategy June 15, 2005 Submitted to: City of Ottawa Transit Services Submitted by: Brian Bourns Engagement Leader KPMG LLP Suite 2000, 180 Elgin St. Ottawa, ON K2P 2P

2 Table of Contents 1 Background Starting Point Current Developments LRT System Considerations Fare Collection Approach Timing Issues Implementation Plan Procurement Strategy Completing the Specifications Workplan and Timeframe...15 Page i

3 1 Background The City of Ottawa prepared a Smart Card Strategy and Business Case in This report should be read in conjunction with the 2003 document. The 2003 report recommended that the City of Ottawa launch a fare payment smart card system for the transit system, selecting and implementing a system with a view to: a) Compatibility with STO; b) Capability for multi-application use over time; c) Flexibility to accommodate changes in requirements in the future (card readers with multiple capabilities); and d) The availability of a family of related products, such as combination cards and singleuse paper cards. This document provides an update on key developments in smart card transit systems, considers the implications of the light rail transit (LRT) project on the need for a smart card fare payment system, and develops an implementation timeframe and process. 1.1 Starting Point The 2003 study found that a smart card fare payment system would have some key advantages for the City of Ottawa: It would 1. Facilitate, encourage and promote the launch of a Personal Ecopass, a permanent pass, paid for by monthly debit charges, with no need for the customer to visit a vendor each month. This would improve customer convenience, encourage increased ridership and provide equity between passengers (only employees of participating businesses can use this service now). 2. Provide a fare payment system compatible with that of STO, which currently has a smart card system, providing better convenience for passengers of both systems, particularly as STO begins use of the smart card for ticket and cash payment. 3. Simplify the fare verification process, improving operator-working conditions (Operators must currently deal with over 50 ways passengers can pay fares and verify each) and allowing them to devote more attention to verifying photos, customer Page 2

4 relations and operation of the vehicle. This, and electronic verification of payment will reduce fare fraud. 4. Provide a way to allow tickets (electronic tickets) to be accepted for the O-Train and to enable controlled access at some stations. 5. Improve image of transit. 6. Provide better information allowing pass pricing to more accurately reflect use, interagency pricing (e.g. STO) to reflect actual use data, and allow analysis of transfer patterns. 7. Provide the potential to introduce new fare and pricing approaches, such as: fare by time of day, fare by distance, student summer passes, adult annual passes, and reserved park and ride spaces. 8. Provide opportunities to establish positive partnerships, particularly with educational institutions. 9. Present opportunities to migrate to a compatible city card over time. 10. Defer the need to replace the on-bus fare boxes, and eliminate the need to consider using modern automated fare boxes (count and verify bills, provide change). The implementation of a smart card fare payment system was expected to cost just under $8 million, including the advertising, public promotion and transition costs involved. It was expected to achieve annual savings of over $1.2million when fully implemented, resulting in a positive net present value, as shown in the table below. If the Province of Ontario provides the 33% capital subsidy the project should qualify for, the costs would be lower, and the net present value higher. Page 3

5 Summary of Financial Implications Before Provincial Subsidy With Provincial Subsidy Capital and One-time Costs (net of subsidy) $7,607,000 $5,745,000 Annual Impact at Maturity (Based on Year 6) Operating Costs $1,018,000 $1,018,000 Operating Savings ($783,000) ($783,000) Revenue Enhancement ($1,484,000) ($1,484,000) Total Annual Impact ($1,249,000) ($1,249,000) Return on Investment 17.3% 23.3% Net Present Value (10 years) $630,000 2,471,000 Years to Payback Investment 8 years 7 years Given the passage of time since these estimates were completed, capital costs before provincial subsidy will have increased to approximately $8.5 million, however savings will increase at a corresponding rate, retaining the positive net present value. Page 4

6 2 Current Developments There are a number of new developments that relate to transit smart cards. STO STO continues to operate its smart card transit fare payment system. In the last two years it has completely eliminated paper monthly passes, but has not yet introduced the purse concept, e.g. the storage of funds on the smart card for use to pay cash fares. It is still planning to do so, but does not consider the purse a key priority, as the advantages to the customer are less significant than for pass holders. Verification of STO monthly passes is a significant challenge for OC Transpo Operators now, and will be much more difficult once the purse is implemented. GTA The Province of Ontario is supporting a project to launch a transit fare payment smart card in the GTA, with the same card to be recognized by all agencies in the GTA. The project has developed very specific and voluminous specifications (over 1,000 pages) and is presently finalizing agreements with each of the participating transit properties. It is expected that proposals will be received in the fall of 2005 and a proponent selected by year end. It is expected that all properties would connect with a common back-end to handle financial transactions and allocate revenues, and the province has agreed to cover the costs of this function, at least for some time. It is planned to have the first partners go live in 2008 with the full roll out in It is not clear at this time what changes would be required to make STO compatible with the system, or how STO would relate to a back office funded by the Province of Ontario. Coalition building has been a major challenge for the project, with substantial efforts required to gain and maintain participation by all the partners. Montreal/Quebec The various transit agencies serving the greater Montreal area and Quebec City are engaged in a project similar to the GTA, with the intention that a common backoffice will support smart cards in various transit systems, with the cards usable in any of the transit systems. Ascom Monetel has been selected to provide and operate the backoffice system and MIFARE B type cards have been selected. STO s system would require significant changes to participate in this project, and to date STO has chosen not to participate, although it has shared its experience to help the group develop the project. Coalition building has also been a challenge for this group, although it is further ahead than the GTA group. Banks Master Card and VISA have reached agreement on a protocol for a contactless small payment transaction smart card (the PayPass that will almost certainly be the industry standard, and is already being deployed in the United States in significant numbers. The card will allow users to pay for small purchases (under $25) simply by swiping the card, without the need to enter a PIN number or wait for an authorization. The cards currently Page 5

7 being issued are only programmed for making small payments and do record information on use that would eliminate the need for transfers, for example, nor do they carry photos, a key requirement for use as a monthly pass. The cards do have the technical capability to be a full service transit solution, however, making partnership with a banking institution part of a potential smart card solution. Other Networks As smart cards are coming into broader use, there may be other networks capable of filling some part of the City of Ottawa needs, particularly the revaluing process. For example the new lottery terminals being installed throughout the city will have smart card capability, and may be able to serve as revaluing stations. Some retailers may have similar capability. This may present an opportunity to establish a wide-based vendor network quickly, with no set up costs. Smart Bus The smart card system in Ottawa was conceived as part of a smart bus program. Key elements of this system, particularly the processor, driver interface and GPS components are to be installed starting in the summer of 2005 and will be ready by the time a smart card system is implemented (the card reader would simply plug into the existing processor, a key reason the system can be installed so inexpensively). To date, no problem has been discovered during the preparation phase of the project that suggests unexpected barriers to the smart card implementation. Suppliers Three system integrators, Cubic, Ascom and ERG are in the process of implementing smart card fare systems in North America, assembling or producing the required hardware and software systems to produce a functional system. Other firms have produced operating systems, particularly in Europe, but do not have North American experience (including Buscom). Cubic has a long history in station control, and is updating systems based on tokens and other media to smart cards, and extending these systems into bus fleets. Ascom has substantial European experience, was a key supplier to the STO and is the selected bidder in Montreal. ERG is an Australian company focused on smart card systems, was involved in launching the Octopus card in Hong Kong and is now developing systems in the western U.S. that will involve a common, ERG operated back office (however the GTA abandoned an ERG based trial project when it did not met their requirements). ERG was the supplier of OC Transpo s successful electronic transfer printer system, installed in Each of these suppliers could likely produce a suitable system for Ottawa, although detailed evaluation of their capabilities and recent experience would be required in selecting the best option. Bell Canada is playing a similar role on the smart bus project in Ottawa, and may have an interest in extending its role into the smart card project. Page 6

8 3 LRT System Considerations The smart card project was initially examined based on its role in the bus system, with some consideration for the potential advantages on the O-Train pilot project. Since that time, the City of Ottawa has embarked on a major LRT development project. This section consider the smart card in the context of the LRT system, and the implications of the LRT project on the smart card project requirements and timeframes. 3.1 Fare Collection Approach No final decisions have been reached on the fare collection approach to be used on the LRT system. There are three general approaches available: An honour based system (POP) An honour based system, such as the Proof of Payment (POP) system now used on articulated buses is the simplest to implement. This approach would allow access to and from LRT stations and vehicles without an inspection of fare payment. Fare inspectors interview passengers on the vehicles seeking proof of payment. The proof of payment could be in the form of a monthly pass or a time-stamped transfer document issued when the passenger paid by cash or tickets. A POP system has the lowest capital costs as stations do not require turnstiles or other barriers to monitor access to the stations or vehicles, allows the most flexibility in station design as access control is not required, and imposes no time delay on boarding which could be a significant advantage at busier stations. Experience elsewhere suggests continuous and adequate levels of enforcement and inspection are required to contain fraud levels. The O-Train is currently operated on a POP basis. Passengers do not interface with the O-Train Operators as they do with bus Operators, eliminating the potential to have the Operator verify the fare. This has presented a problem in accepting tickets as the Operator cannot take the tickets and issue a transfer as a proof of payment. As a temporary solution, OC Transpo has installed machines that accept cash payment and issue a receipt/transfer that can be inspected. However the machines cannot verify regular OC Transpo bus tickets, with the result that the cash fare has been reduced to $2, the average of the cash and ticket fares. A full LRT system could operate on similar principles, with fare inspection activities expanded as required. If a smart card system were in place, the LRT fare payment system would have the same fare flexibility available on the bus system. Pass holders would simply enter the train and Page 7

9 present their pass to an inspector when required. The Inspector would use a special card reader which would provide an immediate validation of the pass. Ticket users would use a smart card equipped with a purse. The user would engage the card reader which would deduct the required payment and record on the card the time and amount of payment. The fare inspector s validator would read this information and recognize it as a valid payment. In addition, if the passenger transferred to a bus or other controlled access environment, these card readers would be able to determine that the fare was paid and the user had valid transfer rights (or determine that a top up was required for premium services, as appropriate). OC Transpo would have the flexibility to price all trips paid by the smart cards at the deep discount ticket price, or to have a price that declines with use over the month, or whatever approach was determined most appropriate. Cash users would continue to pay cash to a vending machine, however the rate could be set the same as on the bus for consistency without harming ticket users. The vending machines could issue smart receipts, essentially smart cards printed on paper that are machine readable (but not durable). The smart receipt would function as a machine readable transfer allowing the user to prove payment to an inspector, board a bus or enter a controlled access station. Thus the existence of a smart card system would improve a POP-based LRT fare collection mechanism significantly, allowing broader flexibility in pricing approaches, including the deep discount ticket approach that has worked so well to reduce cash collections on OC Transpo. It would improve convenience for ticket users who would not required to have cash as they are now on the O-Train and provide clearer transfer capabilities Staffed Stations: One other approach would involve staffed stations, with cashiers controlling access to the station itself. Cashiers would inspect passes, take tickets and cash and issue transfers, playing the role bus Operators have with respect to fare collection. Once in the station, passengers would freely enter and leave vehicles. This system would resolve the issues of payment type, allowing use of tickets and different prices for tickets and cash. However the system would be very expensive, requiring at least one person per station for eighteen hours a day. Additional staff would be required at stations with more than one access point or significant peak hour volumes. Using this approach on the existing O-Train system with its five stations would add $500,000 per year to operating costs. In addition, stations would need to be configured to control access, and each additional access point (e.g. to accommodate passengers arriving from different directions) would add to both the capital and operating costs. This approach is neither practical, nor economical. The human resources could be more effectively employed as fare inspectors on a POP system. Page 8

10 3.1.3 Controlled Access Stations The other option would be stations controlled with automated access points. In this approach, passengers would enter the station through turnstile activated by a fare payment mechanism. The existing paper passes and tickets would not be suited to this use as they are not machine readable. Smart cards would work well for this purpose. The majority of OC Transpo passengers are pass holders, and smart card passes would activate the turnstile or other control mechanism, although it is unlikely mechanical verification of the photo and user ID would be warranted. Ticket users would simply tap their smartcard, the payment would be taken and the transaction recorded to provide transfer rights. Cash users would be required to use a vending machine as described above to purchase a disposable smart card transfer receipt. While very economical to operate (no requirement for cashiers and very little requirement for fare inspectors), this approach would require additional capital costs in station design to control access and provide turnstiles. It would also impose some limitations on station design which would be particularly problematic at high volume street front stations like those expected in the downtown core. This issue has been dealt with in some jurisdictions with controlled access platforms built on the street, but with some considerable esthetic costs and the consumption of considerable sidewalk space. As a result it would be very difficult to build the LRT system based entirely on controlled access stations. However some combination of POP and controlled access might be appropriate, with the controlled access stations serving to limit the scope of fare inspection activity that would be required. While it is beyond the scope of this paper to recommend the appropriate fare collection approach for the LRT system, the most likely approach will be a POP system, although the potential to include access control at some stations may be a useful feature. As noted above, the POP system will be enhanced significantly if a smart card system is in place, allowing consistent pricing approaches, working with passes, tickets and cash, and providing (and reading) transfers for trips starting on the bus, or continuing onto a bus. Economical controlled access stations can only be provided with a smart cards system and smart cards are required if controlled access stations are to be considered. 3.2 Timing Issues The LRT system is expected to be operational late-2009, four years from now. Having the smart card system in use for the opening would eliminate the need for interim arrangements for fare collection on the LRT and then having to convert to a smart card system afterwards. A smart card fare payment system would be more in keeping with the image of a progressive dynamic transit service that the LRT is trying to establish. It would also be preferable if the smart card Page 9

11 system were established and users were familiar with its operation before the LRT opened, rather than have the users introduced to both the smart card and the new LRT service simultaneously. The full implementation of a smart card system will require some time, roughly as follows: Preparation of RFP, review of submissions and selection of contractors 12 months Development and installation of the system 12 to 18 months Initial use as a pass replacement 12 months Introduction of purse, with use for tickets and cash 12months after introduction of the pass (36 to 42 months after the start of the process). As with any project of this size and complexity, there are risks of delays to the project timeline. These may be brought about by the approval process, disputes related to the RFP process and contract award, technical problems, resistance to conversion by the vendor network or customers, etc. In this context, it is essential that project proceed soon if the system is to be fully operational, for pass, ticket and cash users, when the LRT system opens. Page 10

12 4 Implementation Plan Given the scope and implications of the project, the project management process needs to incorporate several stakeholders. In order to ensure the effective integration and support of all stakeholders, a Steering Committee should be formed with at least the following membership: Transit Services, Planning and Development as lead, Information Technology Services, to co-ordinate with smart bus infrastructure, existing networks and systems, and consider systems operational aspects, Supply Management, to advise on purchasing strategy and carry out procurement activities, STO to provide advice related to their experience, ensure interoperability of systems and consider implications for STO systems (desirability/necessity of co-incident upgrades or system changes), Transit Operations to provide input on the Operator interface and operating issues, Transit Support to provide input on the fraud related issues, Fleet Services to coordinate the installation of on bus equipment, Financial Services to assess the proposed back-office system, The Steering Committee would have responsibility for: Developing a procurement strategy Completing the specifications Executing the purchasing strategy (RFI, RFP, contract award) Overseeing implementation of the system. 4.1 Procurement Strategy One possible strategy for procuring a smart card system would be joining the GTA or Montreal/Quebec systems. Some time would be required to explore these options, determine the Page 11

13 feasibility of the approach and negotiate membership. Both are more technically complex than Ottawa requires as the result of the need to serve a large number of independent properties. Any unique Ottawa requirements, including the timing requirements, may not receive high priority in the process and there would be some degree of loss of control. There is significant risk of delays in implementation of these projects, particularly in the GTA project, which has not selected a vendor and has established very specific specifications. While there would be some advantage in having compatible cards with the GTA and Montreal/Quebec systems, the benefits are small compared to the benefits of being compatible with STO. As a result, these approaches are not recommended. The city could also decide to act as its own systems integrator. This approach would involve seeking proposals or tenders for the supply of a range of goods and services independently, and setting specifications to ensure the components operate together effectively to produce a working system. This approach gives the city the greatest possible control over the implementation details, however it also involves a higher level of risk to the city, risks related to application development and the interaction between various system components, risks that can best be assigned to a contractor. The lowest risk option, both in the short term and over the life of the project, would be a public private partnership approach, similar to that being used in the Montreal/Quebec project. This would involve seeking a fixed price for delivery of an operating system, with the supplier/partner taking responsibility for the ongoing operation and development of the back office component. This may also allow the contractor to gain economies of scale by using the back office for more than one property (e.g. allowing for the potential that Ascom could integrate the back office with the Montreal/Quebec project, or that ERG could use its common back office developed in the western U.S., or that a bank could integrate the transit payments system with its over-all card management systems, etc.). This may also be the quickest approach to implement as it leaves the most flexibility to vendors to develop the system that works best. It is therefore recommended that the over-all procurement strategy involve a single RFP to purchase a complete functioning smart card system with: a fixed price for the provision of all hardware, software, initial installation in the existing fleet, testing and commissioning. Unit prices for subsequent potential expansion of the system (including equipment for additional vehicles, stations, additional smart cards, etc.). Where compatible equipment ifs generally available in the industry, the City would retain the right to acquire additional units directly from other suppliers. A price or costing formula for operation of back office components of the system for a five to ten year period. Bidders would also be required to provide a transition strategy, Page 12

14 providing the City an approach to continue operations at the completion or termination of the contract. The RFP would specify the required outcomes, as discussed below, but would not require a particular approach to be adopted in meeting the requirements. Given the range of possible solutions, it would be appropriate to seek industry/bidder input on a draft RFP before it is issued. 4.2 Completing the Specifications Once implemented, the smart card system will be the dominant fare collection system for at least 10 years. It is therefore essential that the system adequately address all key requirements now and after implementation of the LRT system, and have the flexibility to meet other likely requirements in the future. Many of the operational requirements can be clearly stated now, as follows: The key mandatory features are: Accommodates different pass categories, with a photo identification on the card Provides a card based electronic purse, capable of paying single fares (replacing tickets) o Records usage history to Identify and recognize transfer rights Accommodate special pricing options, such as frequent use discounts, time of day or special event pricing, fare by distance, etc. o Accommodates concession cash fares paid with personalized (photo) cards or based on passenger or Operator input (e.g. when parent paying for child) o Provides notice to user when purse value drops below specified limits Provides an alert to Operators when discount pass or ticket categories are used. Provides options for renewal/revaluing of cards, including: o Automatic processing of debit transactions for pass users o A network of vendors capable of revaluing pass and/or purse provisions (could be equipment allowing existing vendors to revalue cards, or some other widely available network such as ATMs, etc.) o Unattended vending machines capable of accepting credit or debit card payments and cash payments for revaluing smart cards and issuing receipts (to serve as transfers, day passes, etc.) Provides a capability to prevent the use of cards reported as lost or stolen, or that are no longer valid. Page 13

15 Is compatible with STO o Card readers can validate STO smart cards o Cards can be validated by STO o Capable of sharing or exchanging data with STO system (invalid cards, financial transactions, etc.) o Requirements can be met by changing STO system as required, as may be acceptable to STO Integrates with the smart bus elements currently being installed on buses. Includes capabilities for card issuance and management o At Sales and Information Centres and for portable use (during launch, student campaigns) Provides basic usage data, including individual card histories, usage by card types (e.g. various pass types, purse users), usage by location/route Capable of implementing all mandatory features on all buses and at LRT stations by June Other desirable features include: Availability of inexpensive limited use media for use as vending machine issued transfers, day passes, etc., Provides customer easy access to value remaining in purse, Potential to provide for access control at stations, o Turnstiles operable by smart cards and limited use machine readable media (or equivalent solution, Capability of accepting payment from PayPass or other electronic payment systems likely to be in wide use within ten years, Automatic processing of debit transactions when purse value drops below specified limit, Accommodates advertising on the card, Provides more sophisticated usage and planning data, including linked trip analysis, Multiple use capability of card: o As a City of Ottawa employee card, capable of being recognized by city access control readers as well as transit smart card capability (also capable of providing recreation facility access control functions for authorized users), o As an employee card or student card by employers or schools participating in Ecopass or similar programs (compatible with smart card functions required by employers or schools), o As next generation library card, with compatible family of RFID products, o As a means of payment at next generation parking meters. Page 14

16 The potential for a wide variety of creative responses to an RFP will be maximized to the extent the mandatory requirements can be minimized, and to the extent the RFP indicates what is to be accomplished, rather than how it is to be achieved. However for vendors to provide a fixed price without substantial allowance for uncertainty, the RFP should provide as much information as possible concerning the existing infrastructure the system would have to relate to (e.g. the existing smart bus components, the STO system), the quantities required and the mandatory and desirable system characteristics as noted above. It will need to distinguish between the cost of the initial system, and the unit cost for supplementary or optional items that could be added later (e.g. as additional buses are put in service, additional LRT stations open, etc.). The RFP submissions would be evaluated based on a combination of the financial proposals, the suitability of the approach to meeting the mandatory requirements and the ability of proponents to provide the desirable features. 4.3 Workplan and Timeframe The key steps in the implementation process and the possible timeframe are identified in the table below. Experience in other properties has varied widely in the implementation timeframe required, with projects involving multiple partners tending to take much longer. The timeframes outlined below should be feasible given the relatively straight forward inter-agency requirements between OC Transpo and STO. This timeframe would also ensure the system is in place and stable before the LRT project is opened. Activity Timeframe Formation of Steering Committee July, 2005 Confirm Procurement Strategy July August, 2005 Report to Transportation Committee September, 2005 Consultant to Prepare RFP October, 2005 Consult with Potential Partners October, 2005 Complete Specifications for RFP Procurement Process October to December, 2005 January, 2006 to April 2006 Page 15

17 Contract Award June, 2006 System Development/Component Installation July, 2006 July, 2007 Initial Implementation (passes only) September 2007 Implementation electronic cash purse September, 2008 Elimination of paper passes January, 2009 Page 16